Jolly Company wants to have 10% of the next quarter's sales in units on hand at the end of each quarter. Inventory at the beginning of the year was 3,800 hula hoops. How many hula hoops should Jolly Company produce during the first quarter?

A. 29,100 units

Explanation:

The computation of the number of hula hoops produced during the first year is shown below:

Production = Budgeted sales + budgeted desired inventory - budgeted beginning inventory

where,

Budgeted sales = 23,900

Budgeted desired inventory = 90,000 * 10% = 9,000

And, budgeted beginning inventory = 3,800

So the number of hula hoops is

= 23,900 units + 9,000 units - 3,800 units

= 29,100 units